What it is:
Electronic commerce is a way of doing business over large electronic networks such as the Internet. Also called e-commerce, electronic commerce greatly facilitates transactions between companies and consumers (B2C), between one company and another (B2B), and between individual consumers (C2C).
How it works (Example):
In e-commerce, exchanges occur between two parties over some electronic medium, typically the Internet. These exchanges are most commonly transactions between companies and consumers, wherein consumers purchase products and services by credit card payment over a secured website. These exchanges, however, can also include transactions between companies as well as between individuals.
An example of business-to-consumer e-commerce would be an online store such as Amazon.com. Anyone with Internet access and a credit card can access the website, browse products and services, make a selection, and purchase a product by credit card payment with the assurance of delivery in the mail.
An example of e-commerce between individuals, or between two consumers, would be an online marketplace such as eBay.com. Similar to the example above, anyone with Internet access and a credit or debit card can browse and purchase available products. The difference here is that products are being sold by individual sellers (other consumers) rather than one large online store.
Why it Matters:
Over the past decade and a half, electronic networks such as the Internet have greatly impacted the way commerce and other transactions are conducted. E-commerce facilitates transactions between two parties because it supersedes the boundaries of physical space (with the exception of delivery of goods or services), allowing the exchange to occur remotely as well as more quickly and efficiently.